President Donald Trump’s tariff plan significantly impacted the US economy’s first-quarter performance as companies stockpiled imported goods ahead of higher levies. However, without this stockpiling, the economy might have appeared even weaker.
According to Ryan Young, senior economist at the Competitive Enterprise Institute, ‘People are stockpiling now. That’s helping the economy now — and then they’re going to spend even less.’
Gross Domestic Product (GDP), which measures all goods and services produced in the economy, fell to an annualized rate of -0.3% in the first quarter of this year, according to Commerce Department data. This drop from the prior 2.4% rate pushed stocks lower, sparked recession talk, and highlighted why Americans’ confidence in the economic outlook fell to its lowest level in 13 years.
The core reason for the decline was the rush to get ahead of Trump’s forthcoming tariffs, which pushed up goods imports by 51% in the first quarter, the fastest pace since 2020. Without this surge in goods, the GDP report could have been worse.
Businesses and consumers moved up purchases, especially big-ticket items, to avoid potential costs. While increased imports relative to exports drag on the economy, the uptick in imports fed into a significant increase in business investments. However, this wasn’t enough to overcome the negative impact of imports.
Gregory Daco, chief economist at Ernst & Young, noted that the data reflects ‘an artificial pull-forward in demand — and what often lies beyond these pull-forward effects is a cliff.’ The second-quarter GDP numbers could be challenging as consumer spending, activity, business investment, and inventories may all become major drags on growth.
— new from CNN